There will come a time when you should sell your shares, regardless of their history. Whether they are serial losers or the darling of your portfolio, as an investor you've just got to say "enough's enough."
I don't know about you but I don't like to lose money, however I do understand that risks need to be taken in order to win because if it were that easy, everyone would be doing it!
If we wanted average returns, we'd do what everyone else does. But we don't. Our job, as savvy investors, is to objectively think outside the box before committing to a buy or sell.
Similarly if we wanted to lose with the rest of the market ,we'd sell when everyone else sells but we're not going to do that either. We're going to sell before people have even considered the company could go backwards.
Famous stock investor and fund manager Peter Lynch once said that if you follow the crowd you'll probably end up losing but noted that, "During the Gold Rush, most would-be miners lost money, but people who sold them picks, shovels, tents and blue-jeans (Levi Strauss) made a nice profit."
Today, here in Australia, it's not a gold rush but a dividend rush. Investors want yield and they want it now. That's forced the price of big name stocks like Commonwealth Bank (ASX: CBA), Westpac (ASX: WBC), ANZ (ASX: ANZ) and NAB (ASX: NAB) to push higher and higher.
Sure, these stocks will grow (probably, very modestly at less than 5% per year) and continue to be the most frequently traded on the ASX. However if we bought them, we'd be doing what everyone else is doing! Our big four banks, compared to their international counterparts, are extremely expensive. Recently, UBS analysts said that the Commonwealth Bank was the most expensive in world, "by almost every measure."
I don't know about you but I'm not waiting around to find out what happens next. Especially when there's so many other stocks on the ASX that pay better dividends and have more potential for growth.
